Photo credit: commons.wikimedia.org

“Someone’s sitting in the shade today because someone planted a tree a long time ago.”

— Warren Buffett

The wisdom of Warren Buffett reflects a value-based philosophy about investing that says investors are buying shares in a business, and encourages strategic thinking about investment time horizon. Before placing a buy order for a stock, a great question we can ask is whether we would still be comfortable making the investment if we couldn’t sell it for many years?

A “buy-and-hold” approach may call for a time horizon that spans a long period of time — maybe even lasting for a two-decade holding period. Suppose such a “buy-and-hold” investor had looked into buying shares of Dollar Tree Inc (NASD: DLTR) back in 2003. Let’s take a look at how such an investment would have worked out for that buy-and-hold investor:

Start date: 04/17/2003
$10,000

04/17/2003
  $185,573

04/14/2023
End date: 04/14/2023
Start price/share: $7.97
End price/share: $147.90
Starting shares: 1,254.71
Ending shares: 1,254.71
Dividends reinvested/share: $0.00
Total return: 1,755.71%
Average annual return: 15.72%
Starting investment: $10,000.00
Ending investment: $185,573.49

The above analysis shows the two-decade investment result worked out exceptionally well, with an annualized rate of return of 15.72%. This would have turned a $10K investment made 20 years ago into $185,573.49 today (as of 04/14/2023). On a total return basis, that’s a result of 1,755.71% (something to think about: how might DLTR shares perform over the next 20 years?). [These numbers were computed with the Dividend Channel DRIP Returns Calculator.]

One more investment quote to leave you with:
“Calling someone who trades actively in the market an investor is like calling someone who repeatedly engages in one-night stands a romantic.” — Warren Buffett